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Is Trading like Gambling?
- Thread starter scalpmaster
- Start date
Quote from scalpmaster:
I am glad there are some sensible coments and opinions.
What I am really interested is to discuss concepts on
gaming/gambling theories implemented in trading systems.
Methods of risk control/money management used in gambling that can also be applied in trading.
Expectancy in gambling is <0
How do you make expectancy in trading less of a variable?
Expectancy in trading is made less of a variable by using a method/criteria/strategy that has a positive outcome for an infinite number of observations.
And as suggested before, that is for you to find or pay for.
You can create your own method.
Anyway, the way I look at it, it is the difference between capitalism and communism.
If you think trading is gambling, go get youself a one way ticket to North Korea, or even China (you may never see the kind of footage that is available for the way the Chinese elite treat their own ordinary people - Bye God it will make you sick).
Let me see. Is trading equal to gambling? I would have to say no. Case in point: the strategies that I utilize have a 6 month win percentage of 80%. This is completely different than the 49.75% win percentage you get at the casino.
If trading were gambling, then the probability that I flip heads 27 times out of 33 is identical to the identity of 27 choose 33 *.5^27*.5^6. Not your basic statistical bs that someone just decided to put down to look smart in front of us all by reciting some of the most basic formulas in statistics.
The formula used prior is refered to as the binomial distribution. Look it up. Here is another case in point. For the last year my strategy wins 84% of the time with 115 wins out 134 trades. So what's the probability of that if we really are gambling? I'll simplify it if we assume that all trades are stochastic.
We arrive at a probability of 134 choose 115 times .5^115 times .5 to the (134-115). I don't feel the need to calculate this because if you reallly understood what I just wrote you would see that this is equivalent to something on the order of 1 in 2^134. Obviously the probability that what my strategies due are because of randomness in the stock market is equivalent to that value.
Therefore, I must conclude, as I was the deciding vote over 50% that it depends on what strategy you're using.
For argument's sake, I will tell you this is identical to what my backtests were, and what my actual results were. Both lead me to believe that there are hundred dollar bills laying around. If you want to know why I think that, then you need to study higher level mathematics. I would know, because I minored in them.
If trading were gambling, then the probability that I flip heads 27 times out of 33 is identical to the identity of 27 choose 33 *.5^27*.5^6. Not your basic statistical bs that someone just decided to put down to look smart in front of us all by reciting some of the most basic formulas in statistics.
The formula used prior is refered to as the binomial distribution. Look it up. Here is another case in point. For the last year my strategy wins 84% of the time with 115 wins out 134 trades. So what's the probability of that if we really are gambling? I'll simplify it if we assume that all trades are stochastic.
We arrive at a probability of 134 choose 115 times .5^115 times .5 to the (134-115). I don't feel the need to calculate this because if you reallly understood what I just wrote you would see that this is equivalent to something on the order of 1 in 2^134. Obviously the probability that what my strategies due are because of randomness in the stock market is equivalent to that value.
Therefore, I must conclude, as I was the deciding vote over 50% that it depends on what strategy you're using.
For argument's sake, I will tell you this is identical to what my backtests were, and what my actual results were. Both lead me to believe that there are hundred dollar bills laying around. If you want to know why I think that, then you need to study higher level mathematics. I would know, because I minored in them.
Is trading like gambling ? I suppose it would be if a trader were to begin his or her career with limited knowledge of how and why markets move. The less a person knows , the more of a gamble it becomes.
All this crap about Positive/Negative Expectancy and Statistical Probabilities is an exercise in intellectual horseshit! .....Some of you guys have a need to sound more sophisticated than the next guy... But, you still SUCK as traders.
The bottom line is: If you're a BAD trader then YOU are gambling.
Take the time to learn HOW to trade, not just place an order or read the quotes.
If you think b/c there's risk and, or uncertainty involved and that makes trading gambling stop trading IMMEDIATELY!!!
The bottom line is: If you're a BAD trader then YOU are gambling.
Take the time to learn HOW to trade, not just place an order or read the quotes.
If you think b/c there's risk and, or uncertainty involved and that makes trading gambling stop trading IMMEDIATELY!!!
Quote from nexial_1002002:
Let me see. Is trading equal to gambling? I would have to say no. Not your basic statistical bs that someone just decided to put down to look smart in front of us all by reciting some of the most basic formulas in statistics.
Fact is that I didn't dream those formulas up, and I didn't post them to look good. I judge my good looks on the money in my account.
i.e. translation of knowledge into practical real life, using creativity, in order to have a better quality/standard of living, where the upside potential is unlimited.
Fact is that I have also minored in maths stats, but no one on ET is going to understand that kind of thing, let alone your calculation.
May be that is the reason why many don't appreciate how good life is in the capitalist west, and keep blaming corporate greed, because they don't know how to put the probability in their favor. It's called education.
Because it's all too easy to play the blame game, rather than get off their butts and get some education.
Then blame everyone afterwards and pigeon-hole everything into gambling. That is the loser mentality.
Quote from 1000:
Fact is that I didn't dream those formulas up, and I didn't post them to look good. I judge my good looks on the money in my account.
i.e. translation of knowledge into practical real life, using creativity, in order to have a better quality/standard of living, where the upside potential is unlimited.
Fact is that I have also minored in maths stats, but no one on ET is going to understand that kind of thing, let alone your calculation.
May be that is the reason why many don't appreciate how good life is in the capitalist west, and keep blaming corporate greed, because they don't know how to put the probability in their favor. It's called education.
Because it's all too easy to play the blame game, rather than get off their butts and get some education.
Then blame everyone afterwards and pigeon-hole everything into gambling. That is the loser mentality.
And may be all it takes is a little programming knowledge and knowledge about integration, differentiation and double differentiation, of an index in order to create a simple method/indicator/criteria, that has a positive outcome for infinite observations
In fact it is possible to consistently put the probability in your favor by 85%, thus making it a positive sums game
and if you're too lazy, and don't want to believe it, then try this
http://www.dtitrader.com/index.php
Attachments
You're right. I bet you also have strategies of your own that have 85% win percentages. I know that it is possible. I'll post a link to a strategy that has been backtested in WL sometime. Essentially there were 94 trades on the NAZ 100 and all of them one? Not by curve fitting, but by a few hours of programming that many people do not understand how to do.
If you're not a quantitative automaton, do not trade intraday, invest passively and enjoy your 10% avg annual returns like the rest of the public.
If you're not a quantitative automaton, do not trade intraday, invest passively and enjoy your 10% avg annual returns like the rest of the public.
The definition of gambling says nothing about positive or negative expectancy, only that the outcome is uncertain (source: Merriam-Webster).
Some people enter trading or casino gambling or backgammon or poker or bridge with a limited knowledge of associated probabilities (and lose), others have a good idea about the long-term positive expectancy of their strategy, but that doesn't change the fact that each trading or gambling event has an uncertain outcome, regardless of strategy employed.
There are even cases in gambling with positive expectancies: blackjack with card counting (see Ed Thorp), horse racing when the odds get skewed (see William Ziemba) are two that come to mind.
Some people enter trading or casino gambling or backgammon or poker or bridge with a limited knowledge of associated probabilities (and lose), others have a good idea about the long-term positive expectancy of their strategy, but that doesn't change the fact that each trading or gambling event has an uncertain outcome, regardless of strategy employed.
There are even cases in gambling with positive expectancies: blackjack with card counting (see Ed Thorp), horse racing when the odds get skewed (see William Ziemba) are two that come to mind.
It is true that some people do not have a statistical advantage trading stocks. They have not isolated an advantageous signal which holds true over a period of time that is statistically significant. Those people are flipping coins and hoping.
Other people have found a signal which is anamolous to chance expected results. If they use discipline to only make a trade when they see that signal, or a group of signals, and they apply it consistently without fear or hope or emotion, then a statistical advantage is likely to hold up.
Then let's consider mob mentality. If everyone says a certain signal is a buy or sell, and the majority of the populous believes it, then it's self fullfilling.
So yeah, if you have a statistically significant advantage, apply equally sized trades, and don't allow emotions to interfere, it's not gambling. There are many other examples of trading that is algorithmic and not chance.
A card counter in blackjack is not a gambler either using the same parameters above. Ask a casino if they want that kind of "gambler."
Other people have found a signal which is anamolous to chance expected results. If they use discipline to only make a trade when they see that signal, or a group of signals, and they apply it consistently without fear or hope or emotion, then a statistical advantage is likely to hold up.
Then let's consider mob mentality. If everyone says a certain signal is a buy or sell, and the majority of the populous believes it, then it's self fullfilling.
So yeah, if you have a statistically significant advantage, apply equally sized trades, and don't allow emotions to interfere, it's not gambling. There are many other examples of trading that is algorithmic and not chance.
A card counter in blackjack is not a gambler either using the same parameters above. Ask a casino if they want that kind of "gambler."